Cash Deposit Certificate option should be removed from the Technical Proposal

Presently, the IRR-A allows the submission of a Cash Deposit Certificate (CDC) at least equal to 10% of the ABC to be bid as an alternative to the submission of a commitment from a licensed bank to extend to the bidder a credit line if awarded the contract to be bid. (See Section 25.3, IRR-A)

During one of the meetings with the Development Partners, it was suggested that the option to submit a CDC as part of the Technical Proposal be removed. In lieu thereof, the NFCC computation required under the Eligibility Documents will be transferred as a requirement in the Technical Proposal. Thus, the liquidity of the bidder may be supported by the submission of either an NFCC computation or a commitment from a licensed bank to extend a credit line.

I am for the suggestion, if only for uselessness of submitting an NFCC as a financial document in the eligibility requirements.

A prospective bidder which submits an NFCC in the eligibility requirement has still to submit either a credit line certificate or a cash deposit certificate in its Technical Proposal. On the other hand, a prospective bidder which previously submits either a credit line certificate or a cash deposit certificate as a financial document in the eligibility requirements need no longer submit the same in the Technical Proposal, as “the previously submitted document shall suffice.” (Sec. 25.3.A.7 and 25.3.B.11 of IRR-A).

So transferring the NFCC/credit line certificate/cash deposit certificate from the eligibility requirements to the Technical Proposal, as well as removal of the cash deposit certificate altogether, will simplify the current requirements.

Whether it's a cash deposit certificate (CDC) or a letter of credit, still it's a document need to be secured from a bank. Such documents are not that obtainable as buying from a store especially when you are trying to implement a "project-specific" and "clause-sensitive" declarations. Some banks do not entertain such and insist on their pro-forma certifications. Even if contractors/bidders can obtain it for the first, the second, third and suceeding certificates, they are equally cumbersome.

Does this requirement really offer more benefit to the government than a piece of precious paper of assurance?

What it seems is, when IRR-A of RA 9184 is formulated, the calibration setting of the law was to a general (national) scene where multi-million projects are simply an average. Consider for example an average procurement in the LGU to be somewhere below P1,000,000. Taking the upper norm limit to be P1,000,000, the 10% CDC corresponds to P100,000 which need not be withdrawn until NTP. The amount of P100,000 may be considered insignificant as such is small enough that most people can have them in savings account. But on the other hand, if the amount is raised ten times, say P10M, the required maintaining deposit of P1M posed an impression of requiring CDC's.

Bottomline: it cannot be totally disregarded. However, the following can be suggested:1. First time bidders for an agency, never been awarded a contract from the same, need to submit CDC irregardless of the ABC;2. For second time or previously awarded bidder within the same agency, the CDC requirement may be optional;3. When the ABC is P2M or above for goods and services and P5M and above for infrastructures, the CDC shall be required irregardless of first or succeeding bidding within the same agency.

I agree that cash deposit certificates may be removed from technical requirements - but subject to qualified limitations. I have posted a similar topic with this one but i shall reiterate my suggested solutions to break conflicts:

1. First time bidders for an agency, never been awarded a contract from the same, need to submit CDC irregardless of the ABC amount;2. For second time or previously awarded bidder within the same agency, the CDC requirement may be optional, but;3. When the ABC is P2M or above for goods and services and P5M and above for infrastructures, the CDC shall be required irregardless of first or succeeding bidding within the same agency.

No violent objections, sir. But may I ask what is the rationale behind your proposal. At this point, my fear is that it would be difficult for the BAC to validate whether a bidder is a first time bidder for the agency or not. Most agencies have more than one BAC. Although coordination is possible, it usually takes time.

Perhaps someone can help us on the reason why these were required in the Eligibility and Technical Envelopes in the first place. I am sure there were reasons and discussion why these requirements were placed in the implementing rules.

Removing them outrightly may somehow impair the smooth implementation of projects, no matter how big or small they may be.

I think CDC is a good alternative if a bidder company is a new player in the field and will not qualify by mere computation of NFCC but is as financial capable as other through other sources such as bank deposits etc.

This is how I understand and remember the rationale for the requirement of a CDC as an option for the NFCC.

The submission of cash deposit certificate was already in place even before R.A. 9184. It was available in P.D. 1594 and E.O. 262, if I'm not mistaken. However, this was required only as part of the technical proposal, not eligibility (or pre-qualification then).

The rationale behind the inclusion of CDC is tied to the objective for the NFCC requirement. The NFCC is required in order to determine the financial capacity of the bidder to obtain additional projects. The "K" variable of the NFCC formula represents the estimated number of times a bidder is expected to revolve existing funds to support the project.

During the IRR-A discussions, it was argued that CDC may also prove the financial liquidity of a bidder. Furthermore, banks were regarded as more capable judges of financial stability and liquidity of an entity. If a bidder has sufficient cash deposited in a bank, the presumption is that the bidder is financially liquid and the amount deposited may be used for the project in the event payment is delayed.

The idea i have introduced in qualifying a second time bidder may be a bit confusing since I have not considered the possibility of multiple BAC's. To qualify, each BAC may impose this (CDC) independently. this would mean that a particular BAC monitors their own registry.

I understand that CDC's may be used to ensure that suppliers/contractors have the capacity to supply/implement the project. But the presence of additional parameters like "retention", "performance", and "warranties" have a feel of excessive redundancy. Going back to my suggestion, the alignment of brackets on ABC shall calibrate the immediate necessity of CDC only on significant amounts.

In terms of a "second time qualified/eligible bidder" who have submitted the bank certificate earlier, the question is the "advantage" over other first time bidders. Breaking the rules of competition? I think not. A "second time" bidder waived of bank certificate for below P2M for GOODS or below P5M for INFRA seemed to have the advantage. But looking on a long term scenario, he may have the initial disadvantage when he first join the bidding. And so the otehr bidder's story goes.

So, the maxim "evaluate on equal grounds" may be justified by everyone's initial declaration thru CDC. Anyway, we are not sure that's the only bank they have nor the "true" amount they have. There goes "bank secrecy".

Hi guys! This is my first time to post here and I'm very glad GPPB took the initiatives on this one. I just hope that at the end of the day, our discussions won't remain as such, but if applicable, should be made official by the GPPB.

On the poll of whether to remove CDC as part of the technical requirements, looks like 'm the first one to vote NO. My reason is known by almost everyone. The NFCC is just not reliable to establish the financial standing of a particular bidder for two reasons:

1. NFCC is based on BIR-Purpose Financial Statements. We all know these financial reports are mainly for compliance by majority of bidders and is not even close in portraying the "TRUE" financial standing of a particular company.

2. NFCC computation incorporates the declaration of the bidder's On-Going Projects. The inclusion of this one as a factor in computing NFCC just lowers its degree of reliability. Most bidders do not declare in the Statement of On-going Projects all of their awarded but not yet started nor started but not yet completed projects.

In other words, the procuring entity would have better assurance of the financial stability of a bidder if it has the ability to deposit in any registered bank the required amount stated in RA 9184. Besides, with the new form for the CDC, the bidders can now request for the lifting of the CDC upon award or disqualification from a particular bidding. Hence, shortening the length of time their working capital would be put on hold for a specific project.

Im happy to be at this forum, and thankful that this exist....atleast there is a way to share opinion for GPPB guidelines

I just want to share my two cents on this matter, I dont believe that CDC serves it purpose!... CDC should show the financial capability of the bidder... True, but since it can not be withdrawn for the duration of the project it is working the other way around... how can it help the finances of the winning bidder if he cannot withdraw from his/her account? There is always a way to check if the bidder is capable to handle the proejct.... it is called track record... and all the BAC needs to do is verify??? Why do private companies does not implement such and they have more succesful bidding/project than the goverment itself? maybe they verify the documents more tidily..

In the draft IRR (consolidation of IRR-A and IRR-B) which is currently posted in the GPPB website ( http://www.gppb.gov.ph/irrb/materials.asp ), and being consulted among stakeholders, the submission of CDC has already been removed from among three (3) existing options that a prospective bidder may submit to prove his financial capacity/eligibility: CDC, NFCC or CLC (Credit Line Certificate).

In the proposed IRR, a prospective bidder may submit an NFCC or a CLC, or a combination of both, if, for example, his NFCC is not sufficient. The NFCC and/or CLC will be submitted as part of the Technical Proposal and not as part of the eligibility requirements. A reading of the draft IRR will also show that instead of a 3-envelope system, a 2-envelope system is being proposed for both procurement of Goods and Infrastructure Projects. The eligibility requirements, aside from being reduced, will be included as part of the Technical Proposal. The bidding procedure for both Goods and Infra would be the same. Eligibility check will be done immediately after the opening of the Technical Proposal, because the Technical Proposal will include the eligibility requirements as well.

I am always for the proposed removal of CDC, not only of the reasons i mentioned, but for the others as well. CDC just don't form part of a reliable measure of bidder's technical qualifications.

As to the other provisions in simplifying the bidding of goods and infra, i would agree in the two (2) envelope system that may be simplified by accomplishing a registry of suppliers/contractors. Similar timelines seem to be reasonable regardless of complexity of infra vs. goods.

To me the NFCC ALONE should suffice. Details there can be subjected to Post-Qual. The purpose of the NFCC is to gauge the financial capability of the bidder to perform the contract. This is ALSO THE OBJECTIVE OF the submission of Financial Documents, AND the PERFORMANCE BOND!!! Agree. Totally useless, both the Cert of Bank Deposit AND the CREDIT LINE CERTIFICATE.

I must say I'm getting ur points on the removal of CDC, but what about the reliability of the Audited Financial Statements of the bidder? I must reiterate like what I said from my previous post that the data used in computing the NFCC came from BIR-purpose financial statements, thus, casting a shadow of doubt in the reliability of NFCC computation.

Further, could somebody please enlighten me as to the reationale behind the "x 10" in the NFCC computation?

I must say I'm getting ur points on the removal of CDC, but what about the reliability of the Audited Financial Statements of the bidder? I must reiterate like what I said from my previous post that the data used in computing the NFCC came from BIR-purpose financial statements, thus, casting a shadow of doubt in the reliability of NFCC computation.

Further, could somebody please enlighten me as to the reationale behind the "x 10" in the NFCC computation?

venom.0420:

Considering the CDC, CLC, and NFCC on equal grounds (i.e. same reliability) the NFCC is the most easiest to produce. Cash deposits cast the same "shadow" you fear of in the form of artificial fund transfers.

I will try to make logical guess in the use of "x 10" in the NFCC. - it's a good rounded whole number.- ease of multiplication (just add zero)- the factor refers to dividing a number by 10% - this is somewhat equivalent to the 10% required amount in CDC'sThis only implies that the x10 may also suggest the standard credit rating of a "liquid" amount as to stretched out capacity by ten times! (better than triple your credit limit in some credit cards huh?)